PM Prices Head for Week’s Gain despite China Slowing

Dollar prices to buy gold hovered just below $1,680 per ounce Friday morning in London – back at levels last seen 10 days ago – as stock markets and industrial commodities ticked lower and government bonds gained.

A day earlier,gold prices jumped 1.6% during US trading – holding onto most of those gains during Friday's Asian session despite the release of lower-than-expected Chinese growth figures.

"There has been a good deal of interest in upside options, particularly for $1,800 June calls, with gold's safe haven performance on Tuesday the likely catalyst."

Tuesday saw gold gain while stock markets fell.

Heading into the weekend, the cost to buy gold in dollars was heading for a 2.2% weekly gain by Friday lunchtime in London.

Prices to buy gold in euros were up 1.8% on the week at around €40,900 per kilo (€1,270 per ounce), while Sterling gold prices were up nearly 2% at around £1,050 per ounce).

Silver prices meantime held steady just below $32.50 per ounce during Friday morning's London trading – heading for a 1.6% weekly gain after posting gains in Thursday's US session.

CME Group, which operates the New York Comex futures and options exchange, has said it will cut its margins on silver futures for the second time since February.

China – the world's second largest source of private gold bullion demand last year – saw its economy grow at its slowest rate in nearly three years during the first quarter of 2012, according to official data published Friday.

Gross domestic product grew 8.1% in Q1 compared to the same period last year, lower than most forecasts. And down from 8.9% growth in the final quarter of 2011.

"What's clear is that the economy is still decelerating and the property sector clearly is deflating," says Yao Wei, Hong Kong-based China economist at Société Générale.

"It seems that property investment has finally started to correct. I think this trend will continue and will drag growth even lower in coming months so we don't think this is the bottom yet. It means more monetary easing will be needed to prevent a sharper deceleration."

About the Author

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.